Singapore vs Malaysia: Which is Better for Business?

Southeast Asia, with a GDP of USD$ 3 trillion in year 2021, is considered as one of the world’s fastest growing markets, especially in Malaysia and Singapore.

Singapore was ranked as the 2nd easiest and friendliest place to do business by The World Bank in the year 2020 with a score of 86.2%. The population is estimated to be around 5,947,961 in 2022 with a GNI Per Capita at USD$ 64,010 in 2021. This country is considered to be a high-income country.

As for Malaysia, the country was ranked as the 12th easiest and friendliest place to do business by The World Bank in the year 2020 with a score of 81.5%. The population is estimated to be around 33,245,918 with a GNI Per Capita of USD$ 10,930. This country is however considered as an upper middle-income country.

Despite the difference in ranks, these countries are considered the two most attractive foreign investment destinations in Southeast Asia. So, how are these two countries beneficial towards your business goals and which you should decide to incorporate in?

Business Environment

In the 2020 Forbes’ Best Countries for Business report, Singapore achieved the commendable 8th global ranking. This recognition stems from its significant accomplishments across crucial domains, such as trade freedom, technological advancement, and a favourable tax environment.

Singapore’s exceptional trade freedom performance, combined with its proactive adoption of cutting-edge technology, has greatly bolstered its appeal as a prime business destination. Furthermore, the lower tax burden in Singapore has heightened its allure as a global hub for commerce and investment.

However, Malaysia has maintained its position at 35th place globally. This ranking underscores the country’s strengths across various domains, such as investor protection, monetary freedom, and innovation.

Despite these positive aspects, Malaysia’s standing in the global business arena hasn’t seen the anticipated surge.
Nevertheless, Malaysia’s robust measures for investor protection, along with its dedication to monetary freedom and innovation, consistently reinforce its economic framework.

The table below illustrates the top three priorities entrepreneurs seek when considering foreign investment.

Above all, the table indicates that in terms of trade freedom, the Singapore domestic market has remained open for as long as it has existed, with almost 95% of the goods that entered Singapore being duty-free. Moreover, this exemplifies Singapore’s commitment to fostering a liberalized trade environment.

Moreover, it highlights the nation’s commitment to enhancing global commerce by reducing tariff barriers. This underscores Singapore’s enduring economic openness, which fosters seamless trade flows and drives economic growth. Singapore’s efficiency at the border, coupled with its high-quality transport services and favourable socio-political environment, propelled it to the top rank in the World Economic Forum’s Global Enabling Trade Report, while Malaysia secured the 37th position.

Workforce

While Singapore may have the upper hand in its business environment, Malaysia has the advantage when it comes to the workforce the country offers.

Malaysia has a larger population with at least 6.2% more compared to Singapore. Even though Singapore’s workforce focuses more on working the future economy that is different and leaner, Malaysia offers those with higher education backgrounds as almost 30% of Malaysia’s workforce has attained a tertiary education background.

Business Language

It is common knowledge that in terms of language, both Malaysia and Singapore mostly use English as the medium of communication. Indeed both countries are also known to have bilingual speakers who can converse in Malay, Chinese as well as Tamil.

Hence, it is still quite easy for foreign investors to adapt to the situation in both countries given they mostly use English as the business language.

Taxation

Malaysia and Singapore have maintained their corporate tax rate at 17% for Small and Medium Enterprises (SMEs). However, Malaysia is bound to charge a flat rate of 24% against foreign-registered Companies in Malaysia. Overall the taxation procedures in Malaysia are double tier as there are taxes to be paid to the Inland Revenue Board and other taxes paid to regional tax authorities.

Bureaucracy

The World Economic Forum has ranked both Singapore and Malaysia highly for the burden of government regulation, transparency of government policy, and public trust in politicians. The Political and Economic Risk Consultancy ranked Singapore as the most efficient bureaucracy in Asia while Malaysia was ranked 7th.

Ease of Business Incorporation Procedures

The steps to incorporating a company in both Malaysia and Singapore take less than 5 days to complete. The steps of incorporation are:

Malaysia

• The preferred or proposed Company name must be submitted via the MyCOID Portal by the appointed Company Secretary. It will take an estimated 1 to 3 working days for SSM to approve or reject the application. Once it’s approved, the incorporation application can be submitted next.
• The company secretary must submit an incorporation application to SSM within 30 days after the name application is approved. Once done, SSM will take at least 3 to 5 working days to approve or reject the application. Once the application is approved, Section 15 – Notice of Registration will be furnished to the appointed Company Secretary
• The company must register with the Royal Malaysian Customs to obtain a Goods and Services Tax number where applicable, which is if the company has a turnover exceeding RM 500,000. The number is generated in 2 weeks.
• The company must also with the Inland Revenue Board to obtain a tax number.
• If the company is hiring local employees, it must register with the Security Fund and the Employee Provident Fund.

Singapore

• A name search and approval must be obtained before registration. The application is done online on the Company Registrar’s website called ACRA by the appointed Company Secretary. The approval or rejection is done on the same day except for certain cases in which ACRA requires more time to assess the application
• The incorporation documents must be filed with the company registrar within 90 days of the name approval. This can be done online. The company registrar sends an official email showing the company’s registration number. The email serves as the Certificate of Incorporation.
• The company must apply for a Goods and Services Tax number issued by the Inland Revenue Authority of Singapore. This is applicable where the company is expecting to make an annual company turnover exceeding SGD 1 million.

Annual Compliance Filing

Both Malaysia and Singapore have almost similar annual compliance filing where:

Singapore

The Annual General Meeting (AGM) for the annual return must occur within 18 months of incorporation and then every 12 months for subsequent years.

Malaysia

According to the Company Act 2016, a Malaysian registered private limited company does not need to hold an Annual General Meeting (AGM) because it can file the annual return each year on its incorporation anniversary date.

Ease of Foreign Investments

Compared to other Asian countries, regulations on foreigners’ participation in business are relatively easy. In Malaysia, a foreigner intending to hold more than 30% shareholding in a company must get approval from the foreign investment committee. In Singapore, a foreigner can hold 100% ownership eventually in a company without seeking any approval.

Indeed, both Malaysia and Singapore share the policy of not imposing visa requirements on foreigners who wish to incorporate companies without intending to relocate. Furthermore, both countries allow foreign shareholders to address company matters while holding short-stay visas. This flexibility not only simplifies the process of setting up businesses but also encourages cross-border entrepreneurship and investment.

A foreign investor planning to relocate to Malaysia must obtain an employment pass. If the company is 100% foreign-owned, the foreigner must demonstrate that it has RM 500,000 in paid-up capital, and if it is a joint venture with local Malaysian partners, RM 350,000 must be demonstrated.

Foreign investors wishing to relocate to Singapore must show that they have 30% or more shareholding in the company and that the company has a minimum paid-up capital of SGD 50,000.

Immigration Requirement

Both Singapore and Malaysia mandate that all foreign ex-pats intending to work must possess valid work passes before commencing work. In both jurisdictions, employment passes are attainable by foreign professionals earning more than MYR 10,000 in Malaysia (depending on the chosen EP category) and SGD$ 5,000 in Singapore (depending on the SAT test).

In a nutshell, both countries offer great benefits in a lot of aspects depending on what the Company’s end goal is. Moreover, they welcome foreign investors with an open arm and the regulations imposed are not as strict compared to other Asian countries.